Jeremy Kalin (right), president of Eutectics Consulting LLC, stands with Ramon Tan, owner of United Noodles in south Minneapolis. The United Noodles solar-energy project, facilitated by Eutectics’ SolarNote program, cost $260,000, but rebates dropped it to $180,000, Kalin says. Tan will pay slightly more than $40,000 for panels after tax incentives are figured into the equation. (Staff photo: Bill Klotz)

Sustainable: ‘SolarNote’ aims to reduce complexity in financing

The first project of the new financing program “SolarNote” became a reality in late December on the rooftop of the United Noodles grocery store and deli in south Minneapolis.

SolarNote is the brainchild of Jeremy Kalin, president of Eutectics Consulting LLC and a former DFL legislator. The biggest roadblock to the expansion of solar power, he said, is the difficulty that building owners encounter getting bank financing and understanding the various tax credits and rebates available to investors.

“SolarNote gives our clients access to capital to pay for a smart investment in their building in the medium and long term,” he said. “It solves that problem and removes the complexity.”

The program offers building owners a chance to become part of the solar energy revolution with no money down, he said. In a SolarNote project, a bank or financial institution finances the panels, and the borrower agrees to transfer all of a project’s rebates and federal tax credits to the lender, Kalin said. Clients can make monthly payments over five years or fewer.

Three lenders have agreed to finance three different 40 kilowatt projects that are using solar panels manufactured by tenKsolar of Bloomington: United Noodles, the Angry Catfish Bicycle and Coffee Bar in Minneapolis, and Kuball Dairy in Waterville. They are all 40-kilowatt projects because that is the ceiling for rebates from Xcel Energy’s Solar Rewards program.

Ramon Tan of United Noodles, 2015 E. 24th St., found out about the program through Cedar Creek Energy, a Coon Rapids-based renewable energy installer and consultant. Rob Appelhof, Cedar Creek’s president, said he worked with United Noodles owner for three years on reducing the 15,000-square-foot grocery store’s energy use and on adding solar panels to its flat roof.

“We spoke to a couple of banks, but they didn’t really understand the process of a solar energy project,” Appelhof said. “Jeremy and his team understand how solar financing works and how the rebates work. We didn’t have to educate anyone.”

The lender on the project was the Minneapolis-based Community Reinvestment Fund, a community development lender with projects around the country. The fund will receive $1.50 per watt, or $60,000, from the Solar Rewards program of Minneapolis-based Xcel Energy.

Banks financing SolarNote projects receive the borrowers’ 30 percent federal tax credit and a “Made in Minnesota” tax incentive, which requires that the panels be manufactured in the state. The choices typically are tenKsolar or Mountain Iron-based Silicon Energy. Kalin said he will not install Silicon Energy panels because the company relies on more expensive tax-equity financing, with a California partner receiving the Minnesota-based rebates and federal tax credit.

“I want SolarNote and our other energy efficiency programs to be financed and built in Minnesota as much as possible,” he said.

The United Noodles project cost $260,000, but rebates dropped it to $180,000, Kalin said. Tan will pay slightly more than $40,000 for panels after tax incentives are figured into the equation, he said.

The initial plan called for United Noodles to pay $809 a month for 53 months, but Tan decided to contribute more per month to pay it off faster.

“This is a pretty good deal for everyone, and I’d rather not pay on a loan longer than I have to,” Tan said.

The program offers enough flexibility that United Noodles, which has $5 million in annual revenue, can reduce monthly payments if it needs to, Tan said.

The panels will produce around 10 percent of his power needs and feed directly into his electrical system rather than be sold to the grid, Tan said. He expects the panels will likely pay for themselves within five years, making the power they produce at that point free. The program offers building owners a chance to become part of the solar revolution with no money down, he said.

A native of the Philippines, Tan opened United Noodles in 1972 and moved to his present location in 1980. Despite having grown up in a warm climate with plenty of sun, he sees solar in frigid Minnesota “as a good source of energy.”

Kalin, 38, left the Legislature in 2010 after two terms in office. Among his legislative achievements was the PACE (Property Accessed Clean Energy) program, which allows municipalities to lend money to building owners to make energy-efficiency improvements. Money for the loans is captured through municipal bonds, which are backed by a special assessment on property owners in the PACE program.

Eutectics has created an investor network for energy-efficiency projects while collaborating with Bremer Bank and the St. Paul Port Authority to extend PACE statewide. While building his business over the past 3½ years, he says he spoke to nearly 400 lenders, from Wall Street to tiny Main Street banks, to develop a more inexpensive financing process for energy efficiency and solar projects.

Part of his pitch with SolarNote is that when businesses try to get financing on their own or push it to a third-party financier such as an investment company, they end up dealing with excessive details and service fees.

“There’s a layer of complexity that building owners can’t wade through on their own,” he said. “The only players serving this role are high-cost, third-party owners that require complex funding instruments.”

Contractors like SolarNote because they no longer have to spend as much time helping customers secure financing, Kalin said. Clients also will pay off their cost of the solar panels within a three- to five-year time frame, much shorter than traditional solar projects, he said.

Kalin’s partner on two of the projects is Bremer Bank. Greg Hohlen, senior vice president who works in the bank’s St. Cloud office, said in an email that he “is excited about what the future might hold” and feels “there a great upside for businesses” that want to pursue solar installations in the future. “It is definitely a fascinating investment,” Hohlen said.

SolarNote isn’t Eutectics’ only offering. Kalin sees his company as a “finance facilitator” that connects businesses wanting energy-efficiency projects with capital willing to help finance it. His approach is gaining notice. The U.S. Department of Energy and the White House recently invited Eutectics to join their “Better Buildings Challenge” because “no one else is doing this Main Street focused financing,” Kalin said.

Eutectics’ role is to help clients get reasonable funding for energy efficiency and solar projects through SolarNote, PACE, equipment leasing and other approaches, Kalin said. As of now, he said, Eutectics has few competitors outside of San Francisco-based BluePath Finance, which it works with on some projects.

“We don’t want clients to have to pay exorbitant fees to do energy-efficiency and solar projects,” he said. “Having us handle the financing just makes sense.”